Division of Finance closes Hume Bank

Tuesday, March 11, 2008

The Missouri Division of Finance was in Hume Friday to close the Hume Bank.

D. Eric McClure, Commissioner of Finance for the State of Missouri, took possession of Hume Bank, Hume, Mo., effective at the close of business Friday. It is the second bank failure in the nation in 2008; the first was the Douglass National Bank, with three branches in Kansas City -- two in Kansas and one in Missouri which failed in January. Branches of Douglass National Bank reopened as part of a Louisiana bank, according to the Kansas City Star.

The Federal Deposit Insurance Corporation was named as receiver for the banks assets. The bank reopened Monday as a branch of Security Bank, Rich Hill.

"All insured deposit liabilities have been assumed by Security Bank, Rich Hill, Missouri," said McClure. "A Certificate of Authority has been issued to them to operate a branch in Hume, Mo," to open Monday, March 10, at the regular time and at the same location for banking business.

"All of the services that Security Bank of Rich Hill is authorized to provide at its locations in Rich Hill, Seligman, Washburn and Rockville, may also be available at the branch in Hume." McClure added, "The new customers of Security Bank of Rich Hill will be doing business with a stronger, better capitalized bank and the establishment of this branch will mean that there will be little, if any, disruption of banking services to the community."

McClure said he was happy Hume residents still have use of the facility, even if the name on the door has changed.

"We're glad that Hume still has banking services and we hope that the customers continue to utilize those services," McClure said. "I feel like it's an isolated incident and does not involve the current operators of the bank."

McClure said the closing had nothing to do with any systemic problems in the banking industry but was a local situation.

"The closing of Hume Bank in no way reflects a weakened condition of the Missouri banking system," McClure said. "The demise of the bank is a direct result of alleged improprieties by former bank management, which resulted in past due loans not being reported and the true condition of the bank being misrepresented. Most of these loans were poorly conceived and inadequately serviced, resulting in losses which exhausted the bank's capital and ultimately resulted in its failure."

McClure did not elaborate on the statement other than saying that in August 2007, the Missouri Division of Finance issued an Order of Prohibition against the bank's former president, Jeffrey Thompson.

David Barr, FDIC spokesman, said it was the state closed the bank.

"The state gets into why it's closed," Barr said. "The FDIC is concerned about getting the bank turned around."

Barr said that the FDIC would conduct its own investigation and would work to divvy up the assets of the bank to pay all the creditors of the bank, which includes all depositors who may have had more than the insurable amount in their account.

"If someone does become a creditor of the bank they receive priority," Barr said. "They would receive a certificate of receivership and would receive a pro rata share as the assets are recovered. For instance, someone with $10,000 in the bank would receive a certificate of receivership for that $10,000 and a person with $25,000 would receive one for $25,000. Payments are in the form of percentages so if the payment were 10 percent, or 10 cents on the dollar, the person with a $10,000 certificate would get $1,000 and the one with $25,000 would get $2,500. That would continue until they received the full amount."

There are four classes of creditors, Barr explained. Depositors are at the top of the heap and shareholders are at the bottom.

"The classes are deposit creditors, they get priority and all of their claims have to be paid off before the next class, the general trade customers get their money," Barr said. "After that there are subordinated bonds, I don't think there were any at Hume, and finally shareholders get anything left over."

Customers with questions about how deposit insurance works, or who would like more information about the failure, can either call the FDIC toll-free at (866) 806-6128, daily, from 9 a.m. to 6 p.m., into next week or visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/Hume.html.

Claims against failed financial institutions occur when bills sent to the institution remain unpaid at the time of failure. Shortly after the failure, the FDIC sends notices directly to all known service providers to explain the claim filing process.

There are time limits for filing a claim.

These time limits are specified in the notice the FDIC sends to those affected.

Anyone who provided a service for Hume Bank and have not received a notice should contact: Federal Deposit Insurance Corporation Receiv-er: Hume Bank, Attention: Claims Department, DRR, 1601 Bryan Street, Dallas, Texas 75201 or call toll free (800) 568-9161.

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